Caracal Announces 2013 Full Year Results

A year of world-class success in Chad
CALGARY, March 31, 2014 /CNW/ - Caracal Energy Inc. ("Caracal" or the
"Company") (LSE:CRCL) is pleased to announce its 2013 year end results, its
first full year results as a listed company. A summary of the results follows,
which should be read in conjunction with the full audited financial
statements, related Management's Discussion & Analysis ("MD&A") and annual
information form ("AIF") which are available at www.caracalenergy.com and on
the Caracal's SEDAR profile at www.sedar.com.
Operational Highlights:
-- Commenced production in September and exited the year with
gross production of 10,000 barrels of oil per day ("bopd");
-- Commenced exploration drilling with first two successful wells:
o Mangara-5 a discovery in the lower Cretaceous E sands tested at up
to 1,917 bopd1 and
o Krim, a discovery in Cretaceous C, D and E sands tested at up to
1,470 bopd, 702 bopd and 2,580 bopd maximum oil rate respectively2
-- Closed the Farm-In Agreement with GlencoreXstrata plc
("Glencore" or "Joint Venture Partner") on June 17, 2013
whereby Glencore paid US$300 million for a 25% working interest
in the Badila and Mangara EXAs;
-- Commenced trading on the premium list of the London Stock
Exchange on July 9, 2013;
-- Closed a US$203 million firm placing and open offer in December
2013;
Continued Success In 2014
-- Oil production grew to 14,200 gross barrels of oil per day
("bopd"), as at March 5, 2014, from 12,000 bopd in January,
2014;
o targeting gross average production in 2014 of 22,000 to 26,000 bopd
-- Revenue generation commenced on March 23, with Caracal's first
lifting of approximately 560,000 barrels of oil, net to the
Company. Pricing for the crude was in line with the Company's
competent person's report assumptions of Brent minus a
differential of five per cent;
-- Badila-7 drilled and tested in March, and flowed naturally at a
rate of 4,500 barrels of oil per day3. The well is expected to
be tied-in during April;
-- Badila-9 spudded on March 20, 2014;
-- Mangara-4 has been successfully side-tracked and cased as a
Cretaceous E sands producer;
-- Mangara-6 has been completed and testing of the Cretaceous E
sands is underway. The comprehensive completion program will
also include tests of the Cretaceous D and C sands;
-- The first of the four new drilling rigs contracted in 2014 has
arrived at the port in Cameroon, on schedule, and should be on
site in Q2;
-- The Company remains on track to mobilize six drilling and three
completion rigs by the end of 2014 to support the active
exploration, appraisal and development drilling program;
-- 2014 exploration programs in the Doba and Doseo basins have
commenced to test one billion barrels of unrisked mean
Prospective Resources with the first 8 to 10 wells in the
program;
-- Finally, furthering its long term strategy, on March 15, 2014
Caracal entered into an arrangement agreement to merge with
TransGlobe Energy Corporation (TSX:TGL)(NASDAQ:TGA)
("TransGlobe") by way of an exchange of shares pursuant to a
plan of arrangement under the Business Corporations Act
(Alberta) (the "Arrangement"). The Arrangement would create
one of the largest independent Africa focused oil producers,
which together will be poised for strong growth in oil
production and reserves from development and exploration in
Chad and Egypt.
Gary Guidry, Chief Executive of Caracal, said:
"2013 was a very significant year for Caracal. We commenced production,
closed a major farm-in agreement with Glencore and listed on the London Stock
Exchange. All of which enabled us to maintain our operational development
with the drilling of development and exploration wells.
"Since the year end, we have become revenue generating with the first lifting
earlier this month. Production is increasing inline with our expectations and
we are on track to hit our target of gross 2014 production of 22-26,000 bopd.
The exploration programme has commenced and the first 8 to 10 exploration
wells will test one billion barrels of unrisked mean Prospective Resources.
"Earlier this month we announced the agreement to merge with TransGlobe to
create one of the largest independent Africa focused oil producers with
focused operations in Chad and Egypt. Post-merger, we will continue to be
entirely focused on onshore, conventional oil production, development and
exploration. The combination will provide shareholders with significant
organic production and reserves growth."
Selected Financial results for the three and twelve months ended December 31,
2012 and 2013
Three months ended Year ended
December 31 December 31
2013 2012 2013 2012
Tariff Revenue 80 - 80 -
Oil Revenue - - - -
Change in Oil 27,159 - 27,159 -
Inventory
27,239 - 27,239 -
Expenses
Operating 4,249 - 4,249 -
expenses
Transportation 2,527 - 2,527 -
expenses
Depreciation and 4,508 328 5,823 1,082
depletion
Salaries and 8,175 4,072 21,108 13,122
benefits
Share-based 3,589 2,076 11,044 8,564
compensation
General and 3,949 5,523 27,996 30,493
administrative
Travel 2,590 3,167 8,586 7,821
Finance expense 7,290 7,246 28,872 8,083
Foreign exchange (140) 474 1,573 228
loss (gain)
36,737 22,886 111,778 69,393
Net loss before 9,498 - 84,539 69,393
tax
Deferred tax (329) (5,381) (329) (5,381)
reduction
Net and 9,169 17,505 84,210 64,012
comprehensive
loss
Oil Production and Inventory
The Company commenced production from the Badila field on September 30, 2013,
and net entitlement share of production for the period to December 31, 2013
was 264,575 barrels. All production for the period to December 31, 2013 was
directed towards the Company's portion of the required line fill. As such,
there was no sale of crude oil in 2013. The Company completed its share of
line fill inventory, on February 6, 2014 following which production
accumulated as "lifting entitlement" for cargo sales for the lifting on March
25, 2014. Pursuant to industry standard, the Company can draw on its share of
line fill inventory if required to meet the standard cargo size and replace
the draw during the next production inventory build period. Hence, the
Company's net entitlement share of production for the period ended December
31, 2013 has been recognised as crude oil inventory and valued at the
estimated net realisable value. As per the Joint Marketing Agreement with its
joint venture partner, Glencore Energy UK Ltd. (the "JMA") in place for the
sale of the Company's crude oil, the price formula uses a dated Brent average
and certain adjustments, including a discount or premium to Brent for the
difference in crude oil quality. In computing the estimated net realisable
value the forward March 2014 Brent price as at December 31, 2013 has been used
and reduced for estimated adjustments under the JMA price formula. The
estimated net realizable value as at December 31, 2013 has been adjusted for
the transit fees that will be due and paid once the volumes are loaded on a
tanker.
The estimated net realisable value of crude oil for the period has been
recorded in the statement of operations as an increase in the value of crude
oil inventory and the value of the inventory is shown in the current assets
within the Company's statement of financial position. The following table
depicts the Company's crude oil inventory position as at December 31, 2013:
Volumes Net Realizable Value
(BBLS) US$ '000
Opening crude oil inventory as - -
at January 1, 2013
Entitlement production 264,575 27,159
Cargo lifting - -
Re-valuation - -
Ending crude oil Inventory as 264,575 27,159
at December 31, 2013
Inland Transportation Pipeline 2013 2012
Tariff revenue 80 -
During the year ended December 31, 2013, the Company also earned revenue
related to the tariff charged for the use of the Company's inland
transportation pipeline operated by, its subsidiary PetroChad Transportation
Company.
Oil inventory comprises production volumes accumulated in pipeline and storage
facilities that have not yet been offloaded and transported to market. The
first off load of oil production occurred on March 21, 2014 which resulted in
the sale of approximately 560,000 barrels of oil net to the Company.
Operating and Transportation Costs, and Depreciation and Depletion
Operating and transportation costs for the Company's inaugural quarter of
production were $4.2 million and $2.5 million, respectively. The unit costs of
$17.43 and $9.55 per barrel for operating and transportation relate to the
264,575 barrels of oil produced in 2013 and held as oil inventory. The unit
costs are expected to decrease as production increases. Production commenced
in late 2013 and as such there was no operating or transportation expense
recorded in the comparative periods.
Depreciation and depletion expense increased by $4.2 million and $4.7 million,
respectively, for the three and twelve months ended December 31, 2013. The
increase is the result of the recognition of depletion in the net book value
of the Badila EXA which commenced production in September 2013. Prior there
to, depreciation related primarily to corporate assets.
General and Administrative Costs
Salaries and benefits - Increased $8.0 million for the year ended December 31,
2013. The increase is a result of the Company progressing from planning,
development, engineering, and procurement to staffing for operating two
drilling rigs, one service rig, constructing a variety of facilities and
infrastructure, and operating production facilities. With the a high level of
activity throughout 2013 and beyond, the Company undertook the required
recruiting campaign to attract and retain needed professionals, scaling its
headcount from approximately 113 employees at the end of December 31, 2012 to
approximately 287 employees at the end of December 31, 2013.
Share-based compensation - Increased for the three and twelve months ended
December 31, 2013 by $1.5 million and $2.5 million respectively. The increase
relates to stock options granted to employees as well as the establishment of
the Long Term Incentive Plan for officers and other key executives of the
Company aimed at retaining, attracting and motivating key executives
responsible for executing the Company's long term business strategy.
General and administrative costs - General and administrative costs decreased
by $1.6 million for the three months ended December 31, 2013 and $2.5 million
for the year ended December 31, 2013. During the year ended December 31, 2012,
the Company accrued $10.5 million to provide for potential penalties and fines
for an issue that was resolved in the first quarter of 2013. During the third
quarter of 2013, Caracal paid $9.8 million in listing fees relating to legal,
financial and accounting advisory services in conjunction with listing the
common shares of Caracal on the London Stock Exchange. As Caracal did not
raise any capital, at that time all fees were expensed.
Travel - The increase in travel during year ended December 31, 2013 is
primarily due to increased personnel traveling to Chad supervising and
executing capital and operating programs. The Company's share of travel for
the three months ended December 31, 2013 compared to the three months ended
December 31, 2012 has decreased due to the change in the carrying interest of
the Company.
Finance expense
On September 13, 2012, Caracal completed a financing through the issuance of
$173.6 million unsecured convertible bonds with a maturity date of September
30, 2017, and can be called in September 2015 at par. The interest rate was
subject to increases unless a qualifying public offering occurred. The
qualifying public offering occurred in 2013 and the interest rate is fixed at
12.5% until maturity. In December 30, 2013, upon completion of the qualifying
public offering, $28.7 million of accrued and unpaid interest was paid out in
cash and shares.
Outlook
With production from Badila coming on-stream during the fourth quarter of 2013
and Mangara production targeted for the third quarter of 2014, Caracal's
financial strategy for 2014 will focus its cash flow from operating activities
to fund the Company's 8-10 high-impact exploration drilling prospects.
About Caracal Energy Inc.
Caracal Energy Inc. is an international exploration and development company
focused on oil and gas exploration, development and production activities in
the Republic of Chad, Africa. In 2011, the Company entered into three
production sharing contracts ("PSCs") with the government of the Republic of
Chad. These PSCs provide exclusive rights, along with its partners, to explore
and develop reserves and resources over a combined area of 26,103 km2 in
southern Chad. The PSCs cover two world-class oil basins with oil discoveries,
and numerous exploration prospects.
The Company's shares trade on the London Stock Exchange under the symbol CRCL.
(1)
______________________________________________________________________
|Interval|Maximum|Flowing|Choke| Total | Gas-Oil |Gravity|Productivity|
| (mKB) | Oil | WHP |Size | Flow | Ratio | (Deg | Index |
| | Rate |(psig) |(in.)|Duration|(scf/stb)| API) | (bopd/psi) |
| |(bopd) | | | (hr) | | | |
|________|_______|_______|_____|________|_________|_______|____________|
|E (2,474| 1,917 | 160 |64/64| 53 | 100 |35 - 39| 1.7 |
|- 2,669)| | | | | | | |
|________|_______|_______|_____|________|_________|_______|____________|
|C (1,896| 3,200 | 200 |80/64| 45.3 | 540 |35 - 37| 2.2 |
| - | | | | | | | |
|2,103.5)| | | | | | | |
|________|_______|_______|_____|________|_________|_______|____________|
(2 )
___________________________________________________________________
| Interval |Maximum |Flowing|Choke|Total Flow| Gas-Oil | Gravity |
| (mKB) | Oil | WHP |Size |Duration | Ratio |(Deg API)|
| | Rate |(psig) |(in.)| (hr) |(scf/stb)| |
| | (bopd) | | | | | |
|_____________|________|_______|_____|__________|_________|_________|
| C | 1,470* | 140 |96/64| 38 | 519 | 36 |
|(2,012-2,166)| | | | | | |
|_____________|________|_______|_____|__________|_________|_________|
| D | 702** | 120 | 1/2 | 38 | - | 35 |
|(2,219-2,520)| | | | | | |
|_____________|________|_______|_____|__________|_________|_________|
| E (2,582 |2,580***| 120 |64/64| 29 | 100 | 34 - 37 |
| -2,630) | | | | | | |
|_____________|________|_______|_____|__________|_________|_________|
* - A total of 1,600 bbls of oil and < 1 bbl of water/completion
fluid recovered
** - A total of 557 bbls of oil and 1 bbl of water/completion fluid
were recovered.
*** - A total of 921 bbls of oil and 8 bbls of water/completion fluid
recovered
(3)
_________________________________________________________________________
| | | Max |Flowing|Choke| Total | | | |
| | | Oil | WHP |Size | Flow | | | |
|Zones|Interval| Rate | | |Duration| GOR |Gravity| PI |
|_____|________|______|_______|_____|________|_________|_______|__________|
| | (mKB) |(bopd)|(psig) |(in.)| (hrs) | | (Deg | |
| | | | | | |(scf/bbl)| API) |(bopd/psi)|
|_____|________|______|_______|_____|________|_________|_______|__________|
| D2, |1758.0 -| 4986 | 580 |56/64| 20.0 | | | |
| D3, | 1932.0 | | | | | | | |
| D4, | | | | | | | | |
| D5, | | | | | | | | |
| D6, | | | | | | | | |
| D8, | | | | | | | | |
| D9 | | | | | | 273.00 | 33.6 | 9.90 |
|_____|________|______|_______|_____|________|_________|_______|__________|
A total of 1,774 bbls of oil and 68 barrels of completion fluid
recovered
CAUTIONARY STATEMENTS:
This announcement contains certain forward-looking information and statements.
Forward-looking information typically contains statements with words such as
"intend", "target", "anticipate", "plan", "estimate", "expect", "potential",
"could", "will", or similar words suggesting future outcomes. Information
relating to reserves and resources is deemed to be forward-looking
information, as it involves the implied assessment, based on certain estimates
and assumptions, that the reserves and resources described exist in the
quantities predicted or estimated, and can be profitably produced in the
future. The Company cautions readers not to place undue reliance on
forward-looking information which by its nature is based on current
expectations regarding future events that involve a number of assumptions,
inherent risks and uncertainties, which could cause actual results to differ
materially from those anticipated by the Company. In addition, any
forward-looking information is made as of the date hereof, and each of the
Company and its affiliates expressly disclaim any obligation or undertaking to
update, review or revise such forward-looking information contained in this
announcement to reflect any change in its expectations or any change in
events, conditions or circumstances on which such information is based unless
required to do so by applicable law.
Forward-looking information is not based on historical facts but rather on
current expectations and assumptions regarding, among other things, the timing
and scope of certain of the Company's operations and the timing and level of
production from the Company's properties, plans for and results of drilling
activity and testing programs, future capital and other expenditures
(including the amount, nature and sources of funding thereof), continued
political stability, and timely receipt of any necessary government or
regulatory approvals. Although the Company believes the expectations and
assumptions reflected in such forward-looking information are reasonable, they
may prove to be incorrect. Forward-looking information involves significant
known and unknown risks and uncertainties. A number of factors could cause
actual results to differ materially from those anticipated by the Company
including, but not limited to, risks associated with the oil and gas industry
(e.g. operational risks in exploration and production; inherent uncertainties
in interpreting geological data; changes in plans with respect to exploration
or capital expenditures; interruptions in operations together with any
associated insurance proceedings; reductions in production capacity, the
uncertainty of estimates and projections in relation to costs and expenses and
health, safety and environmental risks), the risk of commodity price and
foreign exchange rate fluctuations, the uncertainty associated with
negotiating with foreign governments, risk associated with international
activity, including the risk of political instability, the risk of adverse
economic market conditions, the actual results of marketing activities and the
risk of regulatory changes. Forward-looking information cannot be relied upon
as a guide to future performance. Well-test results are not necessarily
indicative of long-term performance or ultimate recovery. Financial outlook
information contained in this report about the Company's prospective cash
flows and financial position is based on assumptions about future events,
including economic conditions and proposed courses of action, based on
management's assessment of the relevant information currently available.
Readers are cautioned that any such financial outlook information contained
herein should not be used for purposes other than for which it is disclosed
herein. The Company does not assume responsibility for the accuracy and
completeness of the forward-looking information or statements and such
information and statements should not be taken as guarantees of future
outcomes. Subject to applicable securities laws, the Company does not
undertake any obligation to revise this forward-looking information or these
forward-looking statements to reflect subsequent events or circumstances. This
cautionary statement expressly qualifies the forward-looking information and
statements contained in this press release.
Terms related to reserves and resources classifications referred to in this
announcement are based on definitions and guidelines in the Canadian Oil and
Gas Evaluation Handbook which are as follows.
"Proved reserves" are those reserves that can be estimated with a high degree
of certainty to be recoverable. It is likely that the actual remaining
quantities recovered will exceed the estimated proved reserves.
"Probable reserves" are those additional reserves that are less certain to be
recovered than proved reserves. It is equally likely that the actual remaining
quantities recovered will be greater or less than the sum of the estimated
proved plus probable reserves.
The qualitative certainty levels referred to in the definitions above are
applicable to individual reserves entities (which refers to the lowest level
at which reserves calculations are performed) and to reported reserves (which
refers to the highest-level sum of individual entity estimates for which
reserves estimates are presented). Reported reserves should target the
following levels of certainty under a specific set of economic conditions:
-- at least a 90 percent probability that the quantities actually
recovered will equal or exceed the estimated proved reserves.
This category of reserves can also be denoted as 1P;
-- at least a 50 percent probability that the quantities actually
recovered will equal or exceed the sum of the estimated proved
plus probable reserves. This category of reserves can also be
denoted as 2P; and
-- at least a 10 percent probability that the quantities actually
recovered will equal or exceed the sum of the estimated proved
plus probable plus possible reserves. This category of reserves
can also be denoted as 3P.
Additional clarification of certainty levels associated with reserves
estimates and the effect of aggregation is provided in the COGE Handbook. The
estimates of reserves and future net revenue for individual properties may not
reflect the same confidence level as estimates of reserves and future net
revenue for all properties, due to the effects of aggregation.
"Prospective resources" are those quantities of petroleum estimated, as of a
given date, to be potentially recoverable from undiscovered accumulations by
application of future development projects. Prospective resources have both an
associated chance of discovery (geological chance of success or "COS") and a
chance of development (economic, regulatory, market, facility, corporate
commitment or political risks). The chance of commerciality is the product of
these two risk components. The prospective resource estimates referred to
herein have not been risked for either the chance of discovery or the chance
of development.
There is no certainty that any portion of the prospective resources will be
discovered. If a discovery is made, there is no certainty that it will be
developed or, if it is developed, there is no certainty as to the timing of
such development or that it will be commercially viable to produce any portion
of the prospective resources.
Figures related to the Company's reserves and resources are derived from the
December 31, 2013 McDaniel Report and the June 30, 2013 McDaniel Report.
A description of the uncertainties and significant positive and negative
factors associated with the estimates of reserves and resources in respect of
the December 31, 2013 McDaniel Report is contained in the Company's Annual
Information Form dated March 31, 2014 and a description of the uncertainties
and significant positive and negative factors associated with the estimates of
resources in respect of the June 30, 2013 McDaniel Report is contained in the
Company's July 25, 2013 material change report. Copies of these documents are
available on the internet under the Company's profile at www.sedar.com.
Information relating to reserves and resources is deemed to be forward-looking
information, as it involves the implied assessment, based on certain estimates
and assumptions, that the reserves and resources described exist in the
quantities predicted or estimated, and can be profitably produced in the
future. Well-test results are not necessarily indicative of long-term
performance or ultimate recovery.
SOURCE Caracal Energy Inc.
Caracal Energy Inc. Gary Guidry, President and Chief Executive Officer Trevor
Peters, Chief Financial Officer +1 403-724-7200
Longview Communications - Canadian Media Enquiries Alan Bayless +1
604-694-6035 Joel Shaffer +1 416-649-8006 FTI Consulting - UK Media Enquiries
Ben Brewerton / Ed Westropp + 44 (0) 207 8313 3113
caracalenergy.sc@fticonsulting.com
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CO: Caracal Energy Inc.
ST: Alberta
NI: OIL ERN
-0- Mar/31/2014 06:00 GMT